A Hold recommendation has been issued to packaging products manufacturer Sonoco Products Company (SON) by Zacks senior analyst Mario Ricchio. Here's what his latest update said:
'We expect restructuring initiatives to boost bottom-line growth over the next couple of quarters. Moreover, strong cash generation paves the way for acquisitions and share buybacks.
'Nevertheless, SON faces several operating challenges, including continued low volume mainly in the tube and cores segment. The company's Q207 EPS though up year-over-year, was below our expectations of $0.59 due to a lower-than-expected decline in volume, unfavorable mix of business, and higher input costs. We expect third quarter profitability to be adversely impacted by weak volume and high prices of old corrugated containers.
'We value Sonoco Products using an EV/EBITDA (enterprise value-to-earnings before interest, taxes, depreciation and amortization) multiple. We estimate Sonoco's 2007 EBITDA (excluding restructuring charges) to increase to $373 million from $346 million in 2006. At its current valuation, Sonoco is trading at an EV/EBITDA multiple of 10.4x 2007 EBITDA, which is above the industry multiple of between 7.4x and 9.4x. Our target price of $30.50 per share is based on an EV/EBITDA multiple of 10.5x our 2007 estimated EBITDA of $373 million.'
Read the full analyst report on SON.
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